INDIA: Surging food prices boosted India’s annual retail inflation rate in June, interrupting four months of easing and removing any hope of a rate decrease by the central bank this year.
Retail inflation reached 4.81% in June, surpassing 4.31% and 4.58% predicted by a UK-based media survey. Food inflation, accounting for 50% of the consumer price basket, rose to 4.49% from 2.96% in May.
Vegetable prices may increase over the next few months as a result of the unpredictable and persistent rainfall in northern India. In June, they went up 12% from the previous month.
The CPI inflation rate increased to a higher than expected 4.8% due to a less favourable base and the beginning of the jump in vegetable costs, as per Aditi Nayar, economist at ICRA, who spoke to the UK media.
Vegetable prices will continue to rise in July, perhaps pushing retail inflation to an “uncomfortable 5.3%-5.5%” this month, according to Nayar.
McDonald’s removed tomatoes from its burgers and wraps in India due to rising tomato costs. Core inflation remained below 6% for a fourth consecutive month, with experts predicting a 5.1%-5.4% increase in June. The Indian government does not disclose the core inflation rate.
In a statement made last month, the Reserve Bank of India stated that it would focus on anchoring inflation close to 4%, the midpoint of its goal range of 2%-6%, and left interest rates unchanged for the second consecutive meeting. By 2023, rates are predicted to stay unchanged by economists surveyed by the UK-based media.
Garima Kapoor, an economist at Elara Capital, predicted that the monetary policy committee would endure the short-term surge in food inflation and continue its extended pause.
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